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Exam 15: Investments

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Question 71

Multiple Choice

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Barnes Company purchased $50,000 of 8% bonds at par.The bonds mature in six years and are a held-to-maturity security.Which of the following is the correct journal entry to record the receipt of the semiannual interest payment?

A) debit Cash, $4,000; credit Long-Term Investments-HTM, $4,000.
B) debt Cash, $2,000; credit Long-Term Investments-HTM, $2000.
C) debit Cash, $2,000; credit Interest Revenue, $2,000.
D) debit Unrealized Gain-Equity, $2,000; credit Cash, $2,000.
E) debit Cash, $4,000; credit Unrealized Gain-Equity, $4,000.

F) B) and D)
G) B) and C)

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Question 72

True/False

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Foreign exchange rates fluctuate due to many factors including changing political and economic conditions.

A) True
B) False

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Question 73

Multiple Choice

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Pravis Corporation owns 30% of Kuster Corporation.Pravis Corporation received $9,000 in cash dividends from Kuster Corporation.The entry to record receipt of these dividends is:

All of the following statements relating to accounting for international operations are true except:

Explain the difference between short-term and long-term investments.Cite examples of each.

Any cash dividends received from equity securities are recorded as Dividend Expense.

Landmark buys $300,000 of Schroeter Company's 8%,5-year bonds payable at par value on September 1.Interest payments are made semiannually on March 1 and September 1.The journal entry Landmark should record to accrue interest earned at year-end December 31 is:

If the exchange rate for Canadian and U.S.dollars is 0.82777 to 1,this implies that 3 Canadian dollars will buy ________ worth of U.S.dollars.

Long-term investments include investments in land or other assets not used in a company's operations.

Debt securities are recorded at cost when purchased,and interest revenue for investments in debt securities is recorded when earned.

Landmark Corp.buys $300,000 of Schroeter Company's 8%,5-year bonds at par value on September 1.Interest payments are made semiannually.All of the following regarding accounting for the securities are true except:

Explain how to account for held-to-maturity debt securities at and after acquisition and how they are reported in the financial statements.

A company received dividends of $0.35 per share on 300 shares of stock it holds as an investment.The journal entry to record this transaction would be to debit Cash for $105 and credit Dividend Revenue for $105.

Return on total assets can be separated into the profit margin ratio and total asset turnover.

Hubbard Company had the following trading securities in its portfolio at December 31.The Fair Value Adjustment-Trading account had a balance of zero prior to year-end adjustment.Prepare the appropriate adjusting journal entry. $\begin{array} { | l | r | r | } \hline { \text { Short-Term Investments } } & { \text { Cost } } & { \text { FairValue } } \\\hline \text { XBM } & \$ 24,500 & \$ 25,900 \\\hline \text { Micro } & 51,000 & 48,600 \\\hline \text { Outel } & 62,300 & 61,000 \\\hline \text { Dull } & 29,900 & 30,200 \\\hline \text { Totals } & \$ 167,700 & \$ 165,700 \\\hline\end{array}$

The two business entities involved in an investment in securities with controlling influence,for which consolidated financial statements are prepared,are known as:

On May 1 of the current year,a company paid $200,000 cash to purchase 6%,10-year bonds with a par value of $200,000; interest is paid semiannually each May 1 and November 1.The company intends to hold these bonds until they mature.Prepare the journal entry to record the receipt of the first semiannual interest payment on November 1.

Landmark Corp.buys $300,000 of Schroeter Company's 8%,5-year bonds payable at par value on September 1.Interest payments are made semiannually.Landmark plans to hold the bonds for the 5-year life.The journal entry to record the purchase should include:

Long-term investments are reported in the:

Available-for-sale securities are actively managed like trading securities because the company intends to trade them for profit in the short term.